Investments and Risk: In its simplest form, the investment return and risk should have a positive correlation.
If an investment carries high risk, it should be accompanied by higher returns.
If an investment is safer, it will often have lower returns.
When making investment decisions, investors must gauge their risk appetite.
Every investor will be different, as some may be willing to risk the loss of principle in exchange for the chance at greater profits.
Alternatively, extremely risk-averse investors seek only the safest vehicles where their investment will only consistently (but slowly) grow.
Investments and Risk
Investments and risk are often strongly related to prevailing conditions in the investor’s life.
As an investor approaches retirement, they will no longer have stable, ongoing income. For this reason, people usually choose safer investments towards the end of their working career.
On the other hand, a young professionals can often bear the burden of losing money as they have their entire career to make that capital back. For this reason, younger investors are often more likely to invest in riskier investments.
